Toronto Stock Exchange Rally halted, period of base building sets

A rally which moved the tse composite index to a post-Oct 19 high of more than 3,300 pts has stalled. During the past week, small advances offset by losses were the norm, suggesting a period of directionless trading is setting in. A bullish interpretation would be that after setting a post-crash high, the gains were not obliterated by a rapid sell- off as has been the case after other rallies in the past.

Today, the index was generally unchanged, adding a marginal 0.32 pts to close at 3,302.09. The gold and silver index was also flat, picking up 1.42 pts to 6,521.19. Metals and minerals were quiet at 2,685.38 pts — up 10.69 on the day. In general then, a day characterized by little movement in either direction. If a support base can be built at 3,300 pts, then further advances would be reasonable in the near future. This premise is supported by the ever-growing view that the dreaded recession of 1988 is not going to raise its head.

The bearish sentiment argues that the underlying fundamentals behind the October crash of 1987 have not changed one single bit. One can’t help but think that another downward correction is unavoidable in the future.

Looking at gold, the second London fix was set at $446.20(US) per oz — up $10 from last week. Bullion, which has been the beneficiary of a plummeting U.S. dollar and growing inflation expectations, will find it difficult to make any major advances with a bottoming dollar and poor prospects for growing inflation this year.

Volume leaders for yet another week were nickel miners Inco Ltd. and Falconbridge Ltd. Buoyed by record high nickel prices of about $5(US) per lb, both stocks have been trading at big volumes of more than 1.7 million shares per week. Inco was unchanged today at $28.25. Falconbridge, which is rumored as a takeover target, was slightly easier at $22.25. Few expect the nickel price to remain at such lofty levels, especially once Falconbridge solves its political problems in the Dominican Republic. However, even at a price of more than $3(US) per lb, both companies will generate very healthy earnings this year.

American Barrick Resources reflected the general apathy amongst the gold stocks this week. After announcing another discovery at Carlin, Nev., the stock dipped 25% to $25.75. The new deposit is aptly known as the Screamer. Takeover target Asamera Minerals, which owns half of the Cannon gold mine in Washington, was steady at $6 — up 75 cents for the week. Gulf Canada, which is offering to acquire control of Asamera Inc., the parent of Asamera Minerals, could sell the gold divison to help finance the purchase. Breakwater Resources, which holds the remaining interest in the mine, was also denying takeover rumors. Breakwater was quiet at $5.88.

This business thrives on rumors, so let’s go with another one. Talk is that Conwest Exploration is looking seriously at making a run at Delaware Resources. Delaware has an interest in the high grade Snip gold deposit controlled by Cominco Ltd. Conwest is cash-rich and has a reputation for astute market investments. Conwest`s A share was up 63 cents this week to $11.25.

Queenston Gold Mines got a much-needed shot in the arm from news that Lac Minerals plans to drift from the Macassa mine across the boundary into Queenston’s Kirkland Lake West property. Macassa’s workings at more than 6,000 ft, nudge right up beside Queenston’s border and are an obvious place from which to begin exploration. Queenston advanced to $1.75. Lac was steady at $13.13.

Exall Resources, an affiliate of Denison Mines, is cashing in big on its interest in a gold concession in Africa’s Ghana. The interest, which will ultimately end up in the hands of Billiton, will net Exall $6.3 million. Only $2.5 million had been spent on the project. Exall gave up 15 cents to 85 cents . Sikaman Gold, which operates the project and which will flip the Exall interest to Billiton, was up at $4.40 before slipping to close at $4.25.